MESSERS ABZAN CONSTRUCTION PRIVATE LIMITED, PATNA V. DCIT, PATNA

CO 08/PAT/2012

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3279 (ITAT-PATNA)
• Duration Of Justice: 5 year(s) 4 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 25-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K DAS
• Keywords: Non compliance; Tax effect
• Section: 44AD; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA BEFORE SHRI J.SUDHAKAR REDDY (AM) & SHRI SANDEEP GOSAIN (JM) ITA NO. 5 7 /PAT/201 2 ASSESSMENT YEARS: 20 08 - 09 D CIT VS. M /S ABZAN CONSTRUCTION P. LTD., CIRCLE - 2 , 1/47, PATLIPUTRA COLONY, PATN A. PATNA. (APPELLANT) (RESPONDENT) PAN - AA EC A 0928L C.O. NO.08/PAT/2012 [IN ITA NO.57/PAT/2012] ASSESSMENT YEAR:2008 - 09 M/S ABZAN CONSTRUCTION P. LTD., VS. DCIT, 1/47, PATLIPUTRA COLONY, CIRCLE - 2, PATNA. PATNA. (APPELLANT) (R ESPONDENT) PAN - AAECA0928L DEPARTMENT BY : S HRI K. K. DAS, DR . ASSESSEE BY : NONE . DATE OF HEARING: - 04 /10 /201 7 DATE OF PRONOUNCEMENT: - 06 / 10 /201 7 ORDER PER SANDEEP GOSAIN, JUDICIAL MEMBER: THIS APPEAL BY REVENUE AND CROSS - OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - DHANBAD, DATED 25 . 0 1.20 12. 2. THE EFFECTIVE ISSUE RAISED IN GROUND S OF APPEAL READ AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS G ROSSLY ERRED BOTH IN FACT AND IN LAW REDUCING THE NET PROFIT OF ASSESSEE FROM CIVIL 2 I TA NO. - 5 7 / PAT /20 1 2 & C.O. NO. 08/PAT/2012 CONSTRUCTION WORK ON CONTRACT BASIS @ 8% OF GROSS RECEIPTS AS MAIN CONTRACTOR AND 6% OF GROSS RECEIPTS AS A SUB CONTRACTOR FROM 10% AS ESTMATED BY THE AO BY WRONGLY PLACING RELIANCE UPON THE DECISION OF HONBLE COURT, MADRAS ORDER PUBLISHED IN 326 ITR 511 WHICH IS NOT CONNECTED WITH THE ISSUE UNDER CONSIDERATION AS THE ISSUE FORMULATED IN THE CASE FOR CONSIDERATION OF THE HONBLE COURT WAS WHETHER THE INCOME TAX APPELLATE TR IBUNAL IS RIGHT IN DISMISSING THE APPEAL PREFERRED BY THE REVENUE WITHOUT GOING INTO MERITS OF THE CASE ON THE GROUND THAT THE TAX EFFECT IS LESS THAN RS.1,00,000/ - . 2. THE CIT(A) HAS ALSO GROSSLY ERRED IN ACCEPTING SECTION 44AD OF THE INCOME - TAX ACT AS G UIDING FACTOR FOR REDUCING NET PROFIT ESTIMATED FROM 10% TO 8% OF GROSS RECEIPTS WHICH IS MORE THAN RUPEES FORTY LAKHS. THE CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT PROVISIONS OF SECTION 44AD ARE APPLICABLE IN THE CASE OF ELIGIBLE ASSESSEE ENGAGED I N ELIGIBLE BUSINESS AS PER EXPLANATION BELOW SECTION 44AD. IN THE INSTANT CASE, THE ASSESSEE IS NOT AN ELIGIBLE ASSESSEE NOR IS IT ENGAGED IN ANY ELIGIBLE BUSINESS IN TERMS OF CLAUSES (A) AND (B) OF EXPLANATION BELOW 44AD. 3. THE CIT(A) HAS ALSO GRO SSLY ERRED IN REDUCING THE NET PROFIT ESTIMATED BY AO FROM 10% TO 8% OF GROSS RECEIPT AS MAIN CONTRACTOR AND 6% OF GROSS RECEIPT AS SUB CONTRACTOR WITHOUT GIVING ANY REASON ON THE BASIS OF WHICH IT WAS DECIDED BY HIM THAT THE NET PROFIT ESTIMATED BY AO APP EARS TO BE ON HIGHER SIDE AND ALSO BY NOT CONSIDERING THE DECISION OF THE HONBLE ITAT, PATNA BENCH, PATNA ORDER DATED 30.09.2010 IN ITA NO. 83/PAT/2010 IN THE CASE OF M/S SHAKTI CONSTRUCTION VS. DCIT, CIRCLE - 3, GAYA IN WHICH THE HONBLE ITAT HAS OBSERVED AS UNDER: NET PROFIT RATE IN THE BUSINESS OF EXECUTION OF CIVIL CONTRACTS CAN VARY FROM LOSS TO POSITIVE FIGURES OF ANY MAGNITUDE. THERE IS NO HARD AND FACT RULE THAT A PARTICULAR PERCENTAGE OF NET PROFIT SHOULD INVARIABLY BE APPLIED IN ALL THE CASES IRRESPECTIVE OF THE FACTS OF THE CASE. 4. ANY OTHER GROUNDS TO BE URGED AT THE TIME OF HEARING OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IT FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008 - 09 ON 07.09.2009 SHOWING TOTAL INCOME AT 3 I TA NO. - 5 7 / PAT /20 1 2 & C.O. NO. 08/PAT/2012 RS.5,86,450/ - . THE CASE WAS SELECTED FOR SCRUTINY AND AFT ER SERVING STATUTORY NOTICES, AND SEEKING REPLY OF THE ASSESSEE ORDER U/S143 (3) OF THE INCOME - TAX ACT,1961 WAS PASSED ON 2 8.12.2010 DETERMING THE TOTAL INCOME AT RS.1,04,47,840/ - AS AGAINST RETURN INCOME OF RS.5,86,450/ - . 4. AGGRIEVED BY THE ORDER OF AO , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES HA D PARTLY ALLOWED THE APPEAL. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENU E HAS FILED AN APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREINABOVE. 6. ALL THE GROUNDS RAISED BY THE REVENUE BEFORE US ARE INTERRELATED AND INTERCONNECTED AND RELATES TO CHALLENGING THE ORDER OF THE LD. CIT(A) IN REDUCING THE NET PROFIT ESTIMATED BY AO FROM 10% TO 8% OF GROSS RECEIPT AS AGAINST THE CONTRACTOR AND 6% AS SUB - CONTRACTOR. THEREFORE, WE THOUGHT IT FIT TO DISPOSE OF THE SAME TO THE PRESENT COMMON ORDER. 7 . WE HAVE HEARD THE COUNSEL FOR BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. BEFORE WE DECID E THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE AND ANALYSE THE ORDERS PASSED BY THE LD. CIT(A) WHILE DEALING WITH THIS GROUND. THE LD. CIT(A) HAS DEALT WITH TH ESE GROUND S IN PARA NO S . 7 TO 10 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: 4 I TA NO. - 5 7 / PAT /20 1 2 & C.O. NO. 08/PAT/2012 7. GROUND OF APPEAL NO.3 IS REGARDING ESTIMATING NET INCOME OF THE APPELLANT @ 10% OF GROSS TURNOVER. 8. FACTS O F THE CASE ARE THAT IN VIEW OF CONTINUED NON COMPLIANCE BY THE APPELLANT, THE AO NOTICED THAT THE APPELLANT HAD SHOWN SUBSTANTIAL SHARE CAPITAL, UNSECURED LOANS AND SUNDRY CREDITORS. THE NET PROFIT SHOWN BY THE APPELLANT AT JUST RS.3,12,046/ - OUT OF TOTAL CONTRACT RECEIPT AT A SUBSTANTIAL AMOUNT OF RS.10,43,77,763/ - WAS NEGLIGIBLE. AFTER HAVING DISCLOSED LOW INCOME, THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND OTHER SUPPORTING DOCUMENTS TO JUSTIFY THE SAME. THERE WERE SOME OTHER DISCREPANCIES IN THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT POINTED OUT BY THE AO AS MENTIONED IN THE ASSESSMENT ORDER. FINALLY, IT WAS OBSERVED BY THE AO THAT THE ASSESSEE WAS A CIVIL CONTRACTOR WHERE PROFIT MARGIN OF 8 TO 10 PER CENT OF THE TURN OVER WAS AVAILABL E. THEREFORE, THE INCOME WAS ESTIMATED @ 10% OF THE TURNOVER. 9. DURING THE APPEAL PROCEEDINGS, THE APPELLANT HAS NOT DISPUTED WITH ANY FORCE REJECTION OF DISCLOSED RESULTS AND ESTIMATION OF NET PROFIT. IT IS ONLY CONTESTING THE NET PROFIT RATE APPLIED BY THE APELLANT. RELIANCE HAS BEEN PLACED IN THE CASE OF DCIT, CIRCLE - 6, PATNA VS SHRI TRIGUNA NAND SINGH, PATNA IN ITA NO.120/PAT/2007 DATED 14.10.2007 WHERE APPLICATION OF NET PROFIT RATE OF 5.7 % HAS BEEN UPHELD. 10. I HAVE CONSIDERED THE FACTS OF THE CA SE CITED BY THE APPELLANT. THE NET PROFIT RATE OF 5.7% WAS ACCEPTED BY THE HONBLE ITAT ON THE BASIS OF APPELLANTS OWN HISTORY AND COMPLETED ASSESSMENTS U/S 143(3) OF THE I. T. ACT,1961. IT IS AN ACCEPTED FACT THAT EVEN IN CASES WHERE NATURE OF BUSINESS I S SIMILAR, NET PROFIT MAY VARY DEPENDING ON FACTS AND CIRCUMSTANCES OF EACH CASE. NO SUCH FACTS RELEVANT TO THE CASE OF THE APPELLANT HAVE BEEN BROUGHT OUT WHICH COULD INDICATE ADOPTION OF LOWER NET PROFIT RATE. THE NET PROFIT RATE OF 10% ADOPTED BY THE AO APPEARS TO BE ON THE HIGHER SIDE. THE APPELLANT HAS SUBMITTED THAT ITS MAIN RECEIPTS ARE ON ACCOUNT OF SUB - CONTRACT WORK AS UNDER: GROSS RECEIPTS TDS GROSS RECEIPTS AS A SUB - CONTRACTOR (FROM NEDAC ENGINEERING LTD.) RS.7,73,63,399/ - RS.8,75,533/ - GROS S RECEIPTS AS A MAIN CONTRACTOR RS.2,70,14,364/ - RS.5,97.216/ - 5 I TA NO. - 5 7 / PAT /20 1 2 & C.O. NO. 08/PAT/2012 IN THE ABSENCE OF ANY DETAILS OR BOOKS OF ACCOUNT FORTHCOMING FROM THE APPELLANT, IT WOULD BE REASONABLE TO ADOPT A NET PROFIT RATE OF 8% ON WORK DONE AS A MAIN CONTRACTOR USING SECTION 44AD OF THE INCOME TAX ACT,1961 AS A GUIDING FACTOR EVEN THOUGH RECEIPTS OF THE APPELLANT EXCEED THE LIMIT PRESCRIBED UNDER THIS SECTION. SUPPORT IS DRAWN FROM THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF C. G. T. VS. A. VAJJIRAM AND BROS. REPORTED IN 326 ITR 511, PREM KUMAR VS. JOINT CIT IN ITA NO. 400/JU/2005 OF JODHPUR BENCH OF THE ITAT AND AJAY KUMAR SINGH VS. JCIT, RANGE 4, PATNA IN ITA NO. 546/PAT/2007 DATED 16.05.2008. IN RESPECT OF RECEIPTS AS A SUB - CONTRACTOR, NET PROFIT RATE OF 6% WULD BE A PPROPRIATE AS PROFIT MARGIN IS LOWER IN WORK DONE ON SUB - CONTRACT . THEREAFTER, INTEREST INCOME AT RS.10,061/ - IS TO BE ADDED SEPARATELY 8 . AFTER HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND HAVING HEARD THE COUNSEL FOR BOTH THE PARTIES AT LENGTH, WE FIND THAT THE LD. CIT(A ) HAS ADOPTED A NET PROFIT RATE OF 8% AS ON WORK DONE AS MAIN CONTRACTOR USING SECTION 44AD OF THE INCOME - TAX ACT AS A GUIDING FACTOR EVEN THOUGH RECEIPTS OF THE APPELLANT EXCEED THE LIMIT PRESCRIBED. THE LD. CIT(A) WHILE REACHING TO THE CONCLUSION IN REDUCING THE NET PROFIT ESTIMATED BY THE AO HAS RELIED UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF C. G. T. VS. A. VAJJIRAM AND BROS. REPORTED IN 326 ITR 511, PREM KUMAR VS. JOINT CIT IN ITA NO. 400/JU/2005 O F JODHPUR BENCH OF THE ITAT AND AJAY KUMAR SINGH VS. JCIT, RANGE 4, PATNA IN ITA NO. 546/PAT/2007. 9. NO NEW FACTS, CIRCUMSTANCES OR CONTRARY JUDGMENTS HAVE BEEN PRODUCED BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED. 10 . S O IN THESE CIRCUMSTANCE S , WE ARE UNABLE TO FIND ANY ILLEGALITY OR IRREGULARITY IN THE FINDINGS OF THE LD. CIT(A). WE THEREFORE, FIND THAT THERE 6 I TA NO. - 5 7 / PAT /20 1 2 & C.O. NO. 08/PAT/2012 ARE NO REASON TO INTERFRERE WITH THE FINDINGS OF THE LD. CIT(A) . HENCE, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED AND THE ORDER PASSED BY THE LD.CIT(A) IS UPHLED. 1 1 . SINCE WE HAVE ALREADY UPHELD THE ORDER OF LD. CIT(A) BY GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE WHILE DISMISSING THE APPEAL OF THE REVENUE, THE CO FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND THE SAME IS ACCORDINGLY DISMISSED. 1 2 . I N THE RESULT, THE APPEAL FILED BY THE REVENUE AND C . O . FILED BY THE ASSESSEE STAND DISMISSED. O RDER IS PRONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER , 201 7 . SD/ - SD/ - ( J. SUDHAKAR REDDY ) ( SANDEEP GOSAIN ) ACCOU NTANT MEMBER JUDICIAL MEMBER DATE OF ORDER: 6 TH OCTOBER , 201 7 . S . S INH A (PS) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT . 2. THE RESPONDENT.: 3. THE CIT(A) - PATNA 4. CIT , PATNA 5. INCOME TAX APPELLATE TRIBUNAL,PATNA 6. GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY